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Friday, 18 May 2012

HP on More Layoffs!

Hewlett Packard, CEO, Meg Whitman may announce a major layoff with next Wednesday’s earnings call when she also details a company restructuring plan. Whitman could eliminate 30,000 workers out of a total of 325,000 or 9% of the workforce. Whitman is repositioning the company away from PCs as smartphones and tablets displace desktop computers. HP may add to sales, product development and R&D. The New York Times reported the news.

Stop the Bleeding

HP needs innovation to staunch the slide in revenues and profits. Revenues could decline 4% to $122 billion this year from $127 billion in 2011.

Aggressive cost cutting by former CEO Mark Hurd may have disadvantaged the company by reducing products in the pipeline. Then, major acquisitions by Whitman’s immediate predecessor, Leo Apotheker, who was with the firm for less than a year, reduced the cash hoard but did not contribute to financial performance and earnings fell sharply. HP spent $40 billion in acquisitions over four years, but was not able to monetize them.

HP has mature product lines in decline. It dominates in PCs that face dwindling demand, margin pressure and intense competition from Asian suppliers. HP also dominates in printers, which generate cash but are fading. About 75% the services business is tied to printers, so that baby goes out with the bathwater. HP may combine the PC and printer units. HP does not play in smart phones and tablets.

Cheap and Getting Cheaper

HP has the lowest valuation of the large cap technology companies. Competitors Cisco, IBM and Oracle have market capitalizations of about 2.3 times revenues, but HP’s market cap is one-fourth its revenues. HP invests less in R&D than its rivals. On the average, Cisco, IBM and Oracle invest about 9% of revenues in R&D while HP invests 2%.

Unlike its competitors that have a vertical integration strategy, HP partners with Microsoft for operating software and with Intel for processors. Investors do not consider Microsoft and Intel to be innovators. Because HP does not control all the processes, it is slow to adopt new technologies. More than a decade ago, HP announced a vision to integrate all the entertainment devices in the home, including the PC and TV. But Apple made the vision a reality, not HP.

Tough Competition

In the consumer market, Apple and Google have the majority of share in smartphones and tablets. Apple leveraged  its iOS operating system that allows devices to synch up and interplay to lock customers into the brand. Apple controls the software, microprocessor design and manufacturing. The vertical integration allows it to beat rivals with advanced technologies.

Competitors have blocked the enterprise too. IBM trumped HP in consulting, security and systems management. Oracle beat HP in software, like big data, storage and analytics. And, Cisco controls networking and cloud gear. What is left?

About her plans, Whitman said in BusinessWeek in March that “We need to move quickly to capture emerging opportunities in areas like cloud, security, and information management,” Whitman continued. “We’ve already assembled some formidable assets. Now we need to align our portfolio to deliver a new generation of capabilities. We see a once-in-a-generation chance to define the future of technology and position HP as a leader for decades to come.”

Susan KallaBy Susan Kalla, Forbes Contributor

 
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Facebook? No thanks!

As Facebook grows, millions say, 'no, thanks'
 
(AP) NEW YORK -- Don't try to friend MaLi Arwood on Facebook. You won't find her there.

You won't find Thomas Chin, either. Or Kariann Goldschmitt. Or Jake Edelstein.

More than 900 million people worldwide check their Facebook accounts at least once a month, but millions more are Facebook holdouts.

They say they don't want Facebook. They insist they don't need Facebook. They say they're living life just fine without the long-forgotten acquaintances that the world's largest social network sometimes resurrects.

They are the resisters.

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"I'm absolutely in touch with everyone in my life that I want to be in touch with," Arwood says. "I don't need to share triviality with someone that I might have known for six months 12 years ago."

Even without people like Arwood, Facebook is one of the biggest business success stories in history.

The site had 1 million users by the end of 2004, the year Mark Zuckerberg started it in his Harvard dorm room. Two years later, it had 12 million. Facebook had 500 million by summer 2010 and 901 million as of March 31, according to the company.

That staggering rise in popularity is one reason why Facebook Inc.'s initial public offering is one of the most hotly anticipated in years. The company's shares are expected to begin trading on the Nasdaq Stock Market on Friday under the ticker symbol "FB". Facebook is likely to have an estimated market valuation of some $100 billion, making it worth more than Kraft Foods, Ford or Disney.

Facebook still has plenty of room to grow, particularly in developing countries where people are only starting to get Internet access. As it is, about 80 percent of its users are outside U.S. and Canada.

But if Facebook is to live up to its pre-IPO hype and reward the investors who are clamoring for its stock this week, it needs to convince some of the resisters to join. Two out of every five American adults have not joined Facebook, according to a recent Associated Press-CNBC poll. Among those who are not on Facebook, a third cited a lack of interest or need.

If all those people continue to shun Facebook, the social network could become akin to a postal system that only delivers mail to houses on one side of the street. The system isn't as useful, and people aren't apt to spend as much time with it. That means fewer opportunities for Facebook to sell ads.

Lee Rainie, director of the Pew Internet & American Life Project, says that new communications channels - from the telephone to radio, TV and personal computers - often breed a cadre of holdouts in their early days.

"It's disorienting because people have different relationships with others depending on the media they use," Rainie says. "But we've been through this before. As each new communications media comes to prominence, there is a period of adoption."

Len Kleinrock, 77, says Facebook is fine for his grandchildren, but it's not for him.

"I do not want more distractions," he says. "As it is, I am deluged with email. My friends and colleagues have ready access to me and I don't really want another service that I would feel obliged to check into on a frequent basis."

Kleinrock says his resistance is generational, but discomfort with technology isn't a factor.

After all, Kleinrock is arguably the world's first Internet user. The University of California, Los Angeles professor was part of the team that invented the Internet. His lab was where researchers gathered in 1969 to send test data between two bulky computers -the beginnings of the Arpanet network, which morphed into the Internet we know today.

"I'm having a `been-there, done-that' feeling," Kleinrock says. "There's not a need on my part for reaching out and finding new social groups to interact with. I have trouble keeping up with those I'm involved with now." Thomas Chin, 35, who works at an advertising and media planning company in New York, says he may be missing out on what friends-of-friends-of-friends are doing, but he doesn't need Facebook to connect with family and closer acquaintances.

"If we're going to go out to do stuff, we organize it (outside) of Facebook," he says.

Some people don't join the social network because they don't have a computer or Internet access, are concerned about privacy, or generally dislike Facebook. Those without a college education are less likely to be on Facebook, as are those with lower incomes.

Women who choose to skip Facebook are more likely than men to cite privacy issues, while seniors are more likely than those 50-64 years old to cite computer issues, according the AP-CNBC poll.

About three-quarters of seniors are not on Facebook. By contrast, more than half of those under 35 use it every day.

The poll of 1,004 adults nationwide was conducted by GfK Roper Public Affairs and Corporate Communications May 3-7 and has a margin of sampling error of plus or minus 3.9 percentage points.

Steve Jones, a professor who studies online culture and communications at the University of Illinois at Chicago, says many resisters consider Facebook to be too much of a chore.

"We've added social networking to our lives. We haven't added any hours to our days," Jones says. "The decision to be online on Facebook is simultaneously a decision not to be doing something else."

Jones says many people on Facebook try to overcome that by multitasking, but they end up splitting their attention and engaging with others online only superficially.

Arwood, 47, a restaurant manager in Chicago, says she was surprised when colleagues on an English-teaching program in rural Spain in 2010 opted to spend their breaks checking Facebook.

"I spent my time on break trying to learn more about the Spanish culture, really taking advantage of it," she says. "I went on walks with some of the students and asked them questions."

Kariann Goldschmitt, 32, a music professor at New College of Florida in Sarasota, Fla., was on Facebook not long after its founding in 2004, but she quit in 2010. In part, it was because of growing concerns about her privacy and Facebook's ongoing encouragement of people to share more about themselves with the company, with marketers and with the world.

She says she's been much more productive since leaving.

"I was a typical user, on it once or twice a day," she says. "After a certain point, I sort of resented how it felt like an obligation rather than fun."

Besides Facebook resisters and quitters, there are those who take a break. In some cases, people quit temporarily as they apply for new jobs, so that potential employers won't stumble on photos of their wild nights out drinking. Although Facebook doesn't make it easy to find, it offers an option for suspending accounts (Look for a link under the "Security" tab in "Account Settings.")

Goldschmitt says it takes effort to stay in touch with friends and relatives without Facebook. For instance, she has to make mental notes of when her friends are expecting babies, knowing that they have become so used to Facebook "that they don't engage with us anymore."

"I'm like, `Hmmm, when is nine months?' I have to remember to contact them since they won't remember to tell me when the baby's born."

Neil Robinson, 54, a government lawyer in Washington, says that when his nephew's son was born, pictures went up on Facebook almost immediately. As a Facebook holdout, he had to wait for someone to email photos.

After years of resisting, Robinson plans to join next month, mostly because he doesn't want to lose touch with younger relatives who choose Facebook as their primary means of communication.

But for every Robinson, there is an Edelstein, who has no desire for Facebook and prefers email and postcards.

"I prefer to keep my communications personal and targeted," says Jake Edelstein, 41, a pharmaceutical consultant in New York. "You're getting a message that's written for you. Clearly someone took the time to sit down to do it."

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The Biggest Cost of Facebook's Growth 

Thursday, 17 May 2012

The Biggest Cost of Facebook's Growth

Running the world's largest social network will be a technical and financial challenge as it grows.


Data store: Facebook’s data center in Prineville, Oregon, is one of several that will help the company cope with its always growing user base.  Facebook

Facebook is the gateway to the Internet for a growing number of people. They message rather than e-mail; discover news and music through friends, rather than through conventional news or search sites; and use their Facebook ID to access outside websites and applications.

As the keeper of so many people's social graph, Facebook is in an incredibly powerful position—one reason its IPO this week is expected to be the largest ever for an Internet company.

But potential investors should take note that there's a flip side to Facebook's explosive growth and power; that flip side, as one analyst put it, is its bid to become a core piece of the Internet's infrastructure. Facebook's own technology infrastructure is expensive to build and operate, and it must scale rapidly.

Infrastructure is Facebook's biggest cost, and to support growing traffic and network complexity, it will have to spend even more. What's less clear is whether Facebook's revenues will likewise increase—especially if additional traffic comes from less lucrative visitors, such as people accessing the site from their phones or from outside North America and Europe.

To date, Facebook has been up to the infrastructure challenge. In less than eight years it has grown to host 526 million daily users, 300 million daily photo uploads, and nine million applications.

Two metrics highlight Facebook's success in this respect.

First, Facebook spent $860 million, or about $1 per active monthly user, to deliver and distribute its products last year. The bulk of that money was related to data center equipment, staff, and operating costs. That is up from about 80 cents and 60 cents per user in the two previous years. For the moment, however, Facebook's revenue, currently at $4.30 per user, is growing at an even faster clip. That's a good sign for any potential investor.

Second, Facebook is not only the Web's biggest social media site, it is also consistently the fastest. In 2010, Facebook's response time averaged one second in the U.S., but had improved to 0.73 seconds by mid-2011, according to AlertSite. By comparison, LinkedIn, the next fastest, took nearly double the time to load. Twitter's site was a full two seconds slower.

Facebook has come a long way since it was first hosted in Mark Zuckerberg's dorm room and expanded as he rented additional servers for $80 a month. By late 2009, Facebook disclosed it was using about 30,000 servers, and since then, the number has more than doubled.

As it has grown, the company's engineers have had to innovate to keep costs down and process a growing volume of data. For example, Facebook designed minimalist custom servers that are cheaper for it to build and run than off-the-shelf ones. It also built a program to optimize the performance of its code, cutting the computing demand on its Web servers by 50 percent. It has open-sourced many of its software innovations and also created the Open Compute Project to widely share its new server designs, with the hope that others could contribute useful innovations.

Today, Facebook is building its own data centers in Oregon, North Carolina, and Sweden. Last year it spent nearly a third of its revenues, $1.1 billion, in capital expenditures on networking equipment and infrastructure. It plans to spend as much as $1.8 billion on such costs this year.

These infrastructure investments are a good sign, says KC Mares, a data-center energy expert and the founder of MegaWatt Consulting; owning and operating rather than leasing data-center space will help Facebook save money in the long term. Other growing tech companies such as Google have pursued this same strategy.

But as Facebook's IPO filing makes clear, there is also a risk to investing in a global infrastructure to serve all users, regardless of their short-term profitability. It is a balancing act.

"If you add too much, it's a big cost that eats into your revenues. If you don't add fast enough, it's an opportunity cost of customers you can't serve," says John Pflueger, a board member of the Green Grid, an IT industry group.

Coming to the wrong conclusions about how to invest in infrastructure can have major consequences. Just look at Friendster, a social network founded before Facebook and MySpace. Friendster had more than 100 million users, but it quickly fell behind as Facebook came to dominate the landscape.

Jim Scheinman, head of business development at Friendster until 2005, says Friendster made product decisions that required too much computing power. For example, it tried to calculate up to six-degree connections between all users. As a result, the site slowed to a crawl. Today, big Web companies often calculate exactly how much revenue they lose when a page is slow to load, even down to tenths of a second.

Facebook, of course, is long past its early days and has more than a critical mass on its platform: almost half of the world's population of Internet users. But to stay relevant as it battles companies like Google, it'll have to stay on the cutting edge, and it will need the computing power to support that.

The question, says Scheinman, is less about costs and capital and more about engineering challenges: "When they have a billion people, and as people use the product more, does that create scaling issues they haven't yet seen before?"

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Facebook? No thanks!

UK bank governor warns of eurozone debt crisis 'storm'; Eurozone 'very close to collapse'!

The Bank of England has cut its growth forecast for this year to 0.8% from 1.2%, saying the eurozone "storm" is still the main threat to UK recovery.
The eurozone was "tearing itself apart" and the UK would not be "unscathed", said its governor Sir Mervyn King.

He also confirmed that the Bank has been making contingency plans for the break-up of the euro.

The rate of inflation will remain above the government's 2% target "for the next year or so", the Bank said.

Sir Mervyn was presenting the Bank's quarterly inflation report.

He told a news conference that the euro area posed the greatest threat to the UK recovery, and there was a "risk of a storm heading our way from the continent".

"We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country's history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution.

"The idea that we could reasonably hope to sail serenely through this with growth close to the long-run average and inflation at 2% strikes me as wholly unrealistic," Sir Mervyn said.

“Start Quote

European policymakers, I suspect, will not rush to thank him for his kind and timely advice”
A 'mess'

Andrew Balls, the managing director in London of global investment firm Pimco, said it was reasonable for Sir Mervyn and other policymakers to plan for a Greek exit.

"Yes, maybe they should plan for an exit, but the thing is, speculating about it can make the event more likely, so the Europeans really do have a mess there," he told the BBC.

"If Greece is to slide out of the euro and collapse, how are they going to protect Ireland, Portugal, Spain and Italy?"

Separately, Prime Minister David Cameron also spoke of the financial storm clouds across Europe, warning that eurozone leaders must act swiftly to solve its debt crisis or face the consequences of a potential break up.

He said during Prime Minister's Questions in the House of Commons: "The eurozone has to make a choice. If the eurozone wants to continue as it is, then it has got to build a proper firewall, it has got to take steps to secure the weakest members of the eurozone, or it's going to have to work out it has to go in a different direction,

"It either has to make up or it is looking at a potential break up. That is the choice they have to make, and it is a choice they cannot long put off."

The Bank's report said, however, that the eurozone crisis was not the only issue weighing on the UK economy, with volatile energy and commodity costs, and the squeeze on household earnings also having an impact.

Andrew Balls, of global investment firm Pimco says, "a disorderly outcome for Greece is going to be bad for the global economy". 


It all meant that the UK economy would not return to pre-financial crisis levels before 2014, Sir Mervyn said.

Nevertheless, he remained optimistic about the longer term. "We don't know when the storm clouds will move away. But there are good reasons to believe that growth will recover and inflation will fall back," he said.

On quantitative easing, he said that no decisions had been made whether or not to continue pumping money into the economy. The last stimulus programme was still "working its way through the system".

'Outlook is probably better'
 
Sir Mervyn's comments came on the day that official unemployment figures showed a fall in the jobless rate, underlining recent surveys that the private sector had become more confident about hiring labour.

He said the fall in joblessness was consistent with the expected gradual recovery in the UK economy.

But Graeme Leach, chief economist at the Institute of Directors, said of the Bank's report: "Talk about kicking an economy when it's down.

"On top of the euro crisis and a double-dip recession, the Bank of England is now saying inflation may not fall fast enough to permit more quantitative easing.

"Actually we think the inflation outlook is probably better than the Monetary Policy Committee (MPC) thinks, with the impact of the euro crisis, declining real incomes and weak money supply growth suggesting inflationary pressures may recede later this year and into 2013.

"After many years of underestimating inflationary pressure let's hope the MPC is now making the opposite mistake by overestimating it".

Ed Balls, Labour's shadow chancellor, said: "The Bank of England has once again slashed its growth forecast for Britain, but despite this the government says it will just plough on regardless with policies that are hurting but not working.

"The governor is right to warn of a coming storm from Europe. That is why we warned George Osborne not to rip up the foundations of the house and choke off Britain's recovery with spending cuts and tax rises that go too far and too fast.

"What happens in the eurozone in the coming weeks and months will have an impact on our weakened economy," Mr Balls added.-  BBC

Eurozone was 'very close to collapse'

Eurozone was 'very close to collapse'

A European Central Bank board member has conceded the ECB may have "saved" the eurozone banking system and eurozone economy in Autumn 2011 by providing one trillion euros of emergency loans to hundreds of European banks at an interest rate of just 1%.

ECB Executive Board member, Benoit Coeure, told Robert Peston: "We were very close to a collapse in the banking system in the euro area, which in itself would have also led to a collapse in the economy and deflation, And this is something that the ECB could not accept."

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Teach and Learn!

To teach is to learn for Leong 



GEORGE TOWN: Lecturer Leong Kit Hong wants to go on teaching. And to do that, he will go on learning.

The 67-year-old INTI International College Penang physics lecturer is now pursuing a degree in Telecommunication in Wawasan Open University here.

He already holds a degree in Physics, Mathematics and a Master's in Physics.

Meaningful gift: Leong (second right) and other lecturers choosing their syngonium plant at the Teachers Day celebration at INTI International College Penang Wednesday.
 
Leong, who joined the teaching profession 40 years ago, said the best way for him to serve the community was to be a good educationist, and he felt that all educationists should have the right blend of skills and the latest knowledge.

Leong, who is one of the college's pioneer lecturers, said his greatest satisfaction “is seeing my students do as best as they can be”.

“When they do well in their studies, they will be able to serve society well later on,” he added.

Asked about his retirement plans, the grandfather of two said he would continue to teach as long as his health allowed him.

Leong, who has been teaching at the college for the past 18 years, was among the lecturers who joined the Teachers Day celebration at the college yesterday.

College chief executive principal Dr Michael Yap Sau Moi said 80 full-time lecturers were presented with a syngonium plant each.

“Teachers plant seeds of knowledge that grow forever,” he said. “As such, we chose to honour our lecturers with this plant instead of the usual roses.”

By KOW KWAN YEE
kowky@thestar.com.my